On 2 November, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai, set aside the reclassification of Brown Rice Protein Powder imported by Unibourne Food Ingredients and quashed a differential customs duty demand of Rs. 85,28,035.

A Bench comprising Judicial Member Ajay Sharma and Technical Member M.M. Parthiban allowed the appeal against the order passed by the Commissioner of Customs (NS-I), Nhava Sheva, holding that the Revenue had failed to establish that the imported product warranted classification under a different tariff heading. The Tribunal observed:

“We find that, in the present case, in light of the Clarification issued by IIT, Kharagpur, it is clear that the imported Brown Rice Protein Powder constitute 'Other Protein Substances', which from a perusal of the rival entries, is more specifically covered under CTH 3504. While the CTH 3504 covers 'Other Protein Substances and their Derivates', CTI 2106 1000 merely covers 'Protein concentrates and other textured protein substances'.”

Unibourne Food Ingredients imported Brown Rice Protein Powder between September 2022 and June 2024. It classified the goods under Customs Tariff Item (CTI) 3504 0099 and paid Basic Customs Duty at 20%. Following an investigation, the Department proposed classification under CTI 2106 1000, which attracted duty at 40%, and demanded differential duty of Rs. 85,28,035.

The adjudicating authority confirmed the differential duty demand along with interest, imposed an equivalent penalty under Section 114A of the Customs Act, 1962, and ordered confiscation of the goods under Section 111(m), with an option to redeem them on payment of Rs. 10 lakh under Section 125.

The Tribunal noted that a technical clarification issued by IIT, Kharagpur, identified Glutelins and Prolamins as the major classes of proteins present in Brown Rice Protein Powder.

It held that cereal proteins were specifically covered under HSN Explanatory Note (B)(1) to CTH 3504, irrespective of their protein content. The Department had neither conducted further testing nor produced a counter-expert opinion to rebut the clarification.

The Bench rejected the Department's reliance on HSN Explanatory Note (6) to CTH 2106, observing that it covered textured protein substances, whereas the imported product was in powder form. Applying Rule 3(a) of the General Rules for Interpretation, it held that the heading providing the more specific description must prevail.

It clarified that the 90% protein-content reference in HSN Explanatory Note (B)(6) to CTH 3504 applied to protein isolates obtained from vegetable substances. It was not a mandatory condition for cereal proteins covered under Note (B)(1).

On the burden of classification, the Bench held that the Revenue had to establish that the goods fell under the tariff heading proposed by it. However, the Department had failed to produce evidence displacing the importer's declared classification.

Further, it observed that rulings issued by US customs authorities under the Harmonized Tariff Schedule of the United States could, at best, have persuasive value and were not binding under Indian customs law.

On limitation, the Tribunal noted that Unibourne had correctly described the goods as Brown Rice Protein Powder in the Bills of Entry and cleared them for home consumption. The Department had not disputed the classification at the time of clearance.

It held that adopting a particular classification based on an interpretation of tariff entries did not, by itself, establish suppression of facts or wilful misstatement with intent to evade duty.

Moreover, the Bench set aside the confiscation under Section 111(m), noting that the Department had ordered it solely on the basis of alleged misclassification without alleging any misdeclaration of the goods' description or value. Further, the goods were no longer available for confiscation, and the Tribunal held that a redemption fine could not be imposed in such circumstances.

Accordingly, CESTAT set aside the impugned order, including the differential duty demand, interest, confiscation, redemption fine and penalties, and allowed the appeal with consequential relief, if any, as per law.

Counsel for Appellant: Prakash Shah, Senior Counsel, with Mihir Mehta and Suyog Bhave, Advocates

Counsel for Respondent(s): Bipin Jadahav, Deputy Commissioner (AR)

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Case Title :  Unibourne Food Ingredients v. Commissioner of Customs (NS-I)Case Number :  Customs Appeal No. 86886 of 2026CITATION :  2026 LLBiz CESTAT(MUM) 643
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